SaaS hoster OpSource buys billing partner

Specialist SaaS hoster OpSource today has announced the acquisition of SaaS billing vendor LeCayla Technologies. OpSource has a number of partners that offer services to its customers, some of them integrated into its real-time service bus — including Aria Systems, another billing vendor — but this is the first time it has acquired a partner. [Disclosure: OpSource is a client and is covering travel costs for me to attend and speak at its SaaS Summit conference in San Francisco later this month].

By pure coincidence, this is the second acquisition of an Irish technology start-up by a San Francisco Bay area SaaS venture within a few days. Last week, SaaS vendor Workday announced its acquisition of Dublin-based Cape Clear Software. LeCayla is also based in the Irish capital, and in both cases, the acquisitions — although made for technology reasons — provide a ready-made European headquarters as a platform for expansion in the European market. LeCayla's CEO, Conor Halpin (pictured), who is well known as a speaker and SIIA contributor on the SaaS conference circuit, has been appointed OpSource's senior VP of EMEA. Terms of the deal have not been disclosed.

I happened to get a briefing last week not only by telephone from OpSource management in San Jose, but also face-to-face from Halpin, who like me was attending the European ISV Conference in Frankfurt. Like his new colleagues at OpSource, Conor has a unique appreciation of the complexity and potential of billing for SaaS vendors and can speak with conviction and passion about the role his company's services can play. But to really make headway in the market, his company had needed to build a US presence, and becoming part of OpSource was the simplest way of achieving that, he told me.

I put it to OpSource's CEO Treb Ryan that this acquisition presented a potential conflict with partners participating in its services bus such as Aria Systems, a direct competitor of LeCayla. "We're going to keep that as an open partner environment with OpSource being one option for people that need these services," he said. He also said there were areas such as online support and contract management that OpSource was not interested in getting into. But OpSource already has its own analytics engine (it partners with Visual Mining for the presentation element of the application) and has engineered its own implementation of MuleSource's open-source ESB for its services bus. So it's clear that OpSource will build or acquire those elements of the SaaS stack that it determines it needs to own.

What's driving this is OpSource's need to have a full-service offering — especially to differentiate itself from the new generation of cloud-computing hosters led by Amazon Web Services. Ryan explained to me that on top of the core technical operations around CPU, storage and bandwidth, hosting SaaS (and indeed any form of Web-hosted business service) requires a lot more at two further layers:

• Application operations — looking after criteria such as performance optimization, change management and end user experience tuning.
• Business operations — providing end-user support, billing and analytics so that vendors can see and understand how customers are using the services.

Ryan said that billing is proving to be top-of-mind for any vendor that's gaining strong market traction, because handling subscriptions, renewals, cancellations and credits rapidly gets very complex. "Even established SaaS companies want to improve their billing processes and make it more effective," he said. (Although I see Microsoft is pulling out of charging for services. Perhaps the vendor found it too complex to administer).

In the future, Ryan believes more granular billing, especially at the web services level, will become increasingly important. "We're completely convinced the next threshold for Web 2.0 customers will be [billing for] the web services," he said. "Le Cayla gives us a lot of those web services capabilities." That, of course, is the theme of my perenially popular post from November 2005, What to expect from Web 3.0, along with its follow-up, The missing feature at the heart of Web 3.0. So I'm not going to disagree with that analysis.

UPDATE [added 2:25pm PST]: Aria Systems CEO Ed Sullivan tells me the acquisition "reinforces what we've been saying for some time: billing is a critical and often-overlooked component of service delivery in the SaaS market." Aria will continue to partner with OpSource, he adds, and will emphasize the wider scope of its offerings. "Thinking about billing as simply invoicing and on-boarding is shortsighted ... the real opportunity lies in the ability to handle complex, recurring transactions inside and outside of the SaaS market," he told me in an email (my schedule today didn't allow a phone briefing). He concludes: "Aria's solution better addresses the entire spectrum of a company's transaction and customer management needs — not just rating and metering."